Budget Maneuvers

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Evaluating whether states used one-time revenues, borrowings, asset sales, and other measures to achieve short-term budgetary balance

A basic principle of successful budgeting is to pay for annual operating expenditures with revenues generated in the same year. Statutory or constitutional requirements in forty-nine states mandate that budgets must be balanced, while Vermont does so by long-standing tradition. But the ebb and flow of states’ economic and budget cycles may push them to use budget maneuvers, or one-time measures, to cover shortfalls.

When revenues lag or expenditures grow unexpectedly, for instance, states may balance budgets by delaying the payment of recurring expenditures into future years or using debt to cover operating costs. One commonly used budget maneuver involves transferring cash from special funds into the general fund.

Proposed and adopted operating budgets should not be dependent on borrowed funds disguised as revenue. At times, governments must borrow to meet intrayear cash flow problems, because tax revenues are not necessarily received on the same schedule as expenditures, or to address sudden revenue shortfalls within the year. While it is recognized that, due to sudden revenue shortfalls, cash balances at times may need to be bolstered with the proceeds of short-term borrowing, that borrowing should never be treated as an element of revenue and provision should be made for its repayment.

Budget Maneuvers Best Practice Indicators